In his report to  the 19th  National Congress of the Communist Party of China, top Party chief Xi Jinping has set some fresh tones for China’s economic development in the coming decades. Instead of mentioning a specific economic growth speed target or overall GDP numbers for the near future, the report put more emphasis on the longer term and more inclusive objectives of economic development, such as the environment and innovation. 

Such a subtle shift in targets and priorities is not only necessary but also critically timely. The miraculous speed of economic growth during the past three decades has put China in the upper middle-income stage of economic growth. As much as China has become increasingly powerful around the globe in more than one area, China’s domestic economic situation and financial stability have become complex and delicate at the very same time. Hence, the trade-off between the quantity and quality of economic growth, the weighing between speed and sustainability, and the balancing between stability and innovation, have all become more concerning and urgent considerations. 

Likely targeted at answering such important questions, the report placed a high level of importance upon the new development theory. The emphasis on a new theory and new guideline conveys an important message about how many things have to change, and how the quality of economic development has to improve going forward. 

It is important to keep in mind that much of the imbalance and unsustainability that China’s economy currently faces is indeed a consequence of economic policies that used to be highly successful and effective during the previous decades. Hence, a gradual, yet fundamental, change in ideas, theory and mentality, is of paramount importance and urgency. 

For example, recent policies have tried to direct financing towards the real economy, instead of pursuing speculative opportunities within the finance sector. It is worth noting, however, that many investment products, especially those related to the real estate sector and infrastructure investments, provide not only higher returns compared to the real economy, but also prevalent government guarantees which make such investments too good to pass. Reforming the finance sector can address some of such balances. However, the key to fundamental change is to gradually switch the entire society’s expectation of the future of the Chinese real estate sector, a topic mentioned more than once in the report. 

Similarly, the report again rightfully stressed the importance of financial stability and preventing systematic financial risks. China’s financial system has grown tremendously during the past three decades along with the real economy. The nature of China’s transitional economy, the gradual opening up of China’s financial system and the lack of experience with economic slowdown or crisis, all make it difficult to use extant knowledge in handling China’s unique situation. The report has made it clear that even though the available path and policy tools may be debatable, it is about time to take the efficiency and sustainability of China’s economy and finance to heart. 

In sum, the report has touched upon almost all the important topics in keeping China’s economic growth sustainable for the coming three decades and highlighted the importance of change in many key strategic areas. What remains to be seen is how much of such an important mandate gets implemented in the years to come. 

(The author is vice president of the National Institute of Finance at Tsinghua University. The article reflects the author's opinion, and not necessarily the views of CGTN.)